Weatherford International: Hold shares

Posted Dec 9th 2009 4:30PM by Joseph Lazzaro

I'm placing a Hold on Weatherford International Ltd.'s (WFT) shares, first recommended on June 4, 2009 at a price of $20.85.

Oil/natural gas services company Weatherford's fundamentals remain strong -- U.S. natural gas markets are firming - but the stock's technicals have deteriorated in the past three months, with the stock chart forming a double top -- a bearish formation.

Further, the stock has fallen below the key, 50-day moving average and repeatedly failed to rise above it, creating a bear hug -- another bearish formation. Finally, the stock price decline has been larger than what one would see during normal, year-end profit taking. The First Call FY2009/FY2010 EPS estimates for WFT are 61 cents to 98 cents.

There's nothing to suggest WFT will report a horrible quarter, but the calculation here argues that when the technicals and fundamentals contradict, it's time to stand aside. I'll re-evaluate Weatherford's performance in about one month.

Stock Analysis: Weatherford International Ltd. is a moderate-risk stock. If you've already purchased the company's shares, hold them. If you haven't, Don't Buy shares at this time. Sell/Stop Loss if you bought shares in this company: $6.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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